Winter 2020

Thanks to Trump, Workers May Soon Lose the Right to Bring Class-Action Lawsuits

Thanks to Trump, Workers May Soon Lose the Right to Bring Class-Action Lawsuits

In our legal system, there are only two things that corporations fear: jury trials and class-action lawsuits. The Supreme Court is poised to help them do away with both, in one fell swoop.

Andrew Strom &squarf; July 11, 2017
Trump announces Neil Gorsuch as his nominee to the Supreme Court, January 31 in the White House

Last fall, a web TV series called Good Girls Revolt debuted. The show was a fictionalized account of forty-six female Newsweek staffers who joined together to bring a sex discrimination case against the magazine in 1970. According to an NPR report, the women were shunted into “researcher” positions, rather than being given the title of “reporter”; they were forced to serve coffee to superiors; and they were denied bylines and other credit for the work they did. But, by engaging in collective legal action, the women were able to bring about change, forcing Newsweek to confront its institutional sexism. This fall, the Supreme Court will hear arguments in a case, Epic Systems Corp. v. Lewis, that asks whether employers may condition employment offers on workers agreeing not to engage in similar collective legal action. President Obama’s appointees on the National Labor Relations Board, and several circuit courts, have held that these types of waivers are unenforceable. But last month, in a highly unusual move, the Trump Justice Department switched sides in the case and filed a brief backing the employers.

In our legal system, there are only two things that corporations fear: jury trials and class-action lawsuits. Employers have figured out a way to eliminate both of these risks: prospective employees are told that if they want a job, they must enter into an agreement to arbitrate any potential claims, waiving the right to a jury trial and barring them from joining with other workers in a collective or class-action proceeding. While lawsuits create a public record, arbitration cases take place behind closed doors, so, like Roger Ailes’s sexual harassment victims, workers may never realize that their coworkers have raised similar concerns. The prohibition against collective legal action also makes it easier for an employer to get away with wage theft. For instance, there have been a number of cases where meatpacking workers sought compensation for the time they spend taking protective equipment on and off. For each worker, this might amount to less than ten minutes per day, but when you multiply it by a thousand workers, the stakes are considerably larger, and it becomes much easier to attract a highly skilled attorney to take the case.

Over the past thirty years, the Supreme Court has been steadily opening the door wider and wider to these mandatory arbitration agreements. Courts have enforced the agreements based on the premise that they are entered into voluntarily, but the Republican Congress has not yet gotten around to repealing the 1932 Norris–La Guardia Act, which recognized that “the individual unorganized worker is commonly helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby to obtain acceptable terms and conditions of employment.”

One key case that has led to widespread use of mandatory arbitration for workers is Circuit City Stores, Inc. v. Adams, which was decided by the Supreme Court in 2001, in a five-to-four decision. That case involved the interpretation of the Federal Arbitration Act (FAA), a 1925 law designed to promote commercial arbitration. When Congress was debating that law, organized labor came out against it, and in response, Congress amended the bill to provide that it would not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The Executive Council of the American Federation of Labor then issued a statement declaring that the amendment “exempted labor from the provisions of the law,” and labor dropped its opposition.

The reference to “seamen” and “railroad employees” might at first glance seem confusing. After all, if the intent was simply to exempt all employment contracts, there would be no need to mention any subset of workers. But in the 1920s, the prevailing view was that congressional power to regulate interstate commerce only extended to those workers, like sailors and railroad workers, who were themselves engaged in interstate commerce, as opposed to factory workers who made goods that were sold in other states. So the exclusion was designed to be as broad as Congress’s regulatory authority. But when the Circuit City case came to the Supreme Court in 2001, the five-member majority decided to read this exemption as only applying to transportation workers. In a dissenting opinion, Justice Stevens criticized the majority for “skew[ing] its interpretation with its own policy preferences.”

Circuit City emboldened employers to impose mandatory arbitration on more and more workers. But employers were not merely content to require arbitration—they also realized that even before an arbitrator, they did not want to face the risk of a large class-action award. So employers added language in their mandatory arbitration agreements preventing workers from bringing claims collectively.

That’s where the National Labor Relations Board and several circuit courts decided that employers finally went too far. The National Labor Relations Act not only protects the right to form a union, but it also gives workers the right “to engage in other concerted activities for the purpose of . . . mutual aid or protection.” The Supreme Court has previously held that this protects workers “when they seek to improve working conditions through resort to administrative and judicial forums.” In two different cases, D.R. Horton, and Murphy Oil USA, Inc., the NLRB explained that the “right to engage in collective action – including collective legal action – is the core substantive right protected by the NLRA and it is the foundation on which the Act and Federal labor policy rest.” In other words, the NLRA not only protects the rights of workers to engage in a work stoppage to protest their employer’s policies, it also protects their right to file a collective legal claim. And while an employer may have the right to channel that claim to an arbitrator rather than a judge, the employer does not have the right to prohibit workers from bringing the claim as a group.

The Fifth Circuit Court of Appeals, based in New Orleans, rejected the NLRB’s analysis, and instead held that mandatory arbitration agreements waiving the right to pursue a collective or class action are enforceable. But, two other circuits—the Seventh Circuit, based in Chicago, and the Ninth Circuit, based in San Francisco—reached the opposite result. In September 2016, the Solicitor General’s office, which represents all departments of the federal government in proceedings before the Supreme Court, filed a petition with the Court, asking it to review the Fifth Circuit’s decision in Murphy Oil. In that brief, the Solicitor General argued that the Fifth Circuit was wrong, and the NLRB was correct in its conclusion that arbitration agreements that preclude workers from engaging in concerted legal action violate the NLRA. In January, the Supreme Court agreed to hear three different cases raising this issue, and consolidated them all for a single argument. Then, in mid-June, the Solicitor General switched sides and filed a brief in support of the employers, arguing that the NLRB’s decision was incorrect.

This type of mid-stream change of positions was not exactly unprecedented, but it was highly unusual. The last time this happened after the Court had already agreed to hear a case was in 1981, and then, it made the front page of the New York Times. The lawyers in the Solicitor General’s office are generally career attorneys who stay from one administration to the next. The lawyer who signed the first Murphy Oil brief as counsel of record was Edwin Kneedler, who has worked in the Solicitor General’s office since 1979, and has argued more than 125 cases to the Supreme Court. When Kneedler received a distinguished service award in 2014, Paul Clement, who served as George W. Bush’s Solicitor General, and who has become the go-to lawyer for conservative causes, praised Kneedler for his integrity. Clement said that the Justices respect Kneedler because “they know they are getting it straight when they are getting it from Ed Kneedler. . . . He will zealously represent his client, but he will not endanger his relationship or the long-term interests of the Solicitor General with the court.” Needless to say, the Trump administration wasn’t worried about those long-term interests when it abruptly changed positions in the case. The new brief explains that “[a]fter the change in Administration, the [Solicitor General’s] Office reconsidered the issue and has reached the opposite conclusion.”

Most likely, sometime early next year, the Supreme Court will issue a 5-4 decision holding that agreements where workers waive the right to engage in collective legal action are enforceable. Fox News will probably give the decision little or no coverage, and most of the working-class citizens who voted for Trump will not realize that once again, his administration took the side of the powerful against the powerless, not only by filing a brief on the side of employers, but by appointing Neil Gorsuch, who will surprise no one when he casts the deciding vote for the employers.

Andrew Strom is an Associate General Counsel of Service Employees International Union, Local 32BJ. The views expressed here are his alone.